Case update: Nuffield Health gyms, public benefit, and business rates in the UK

Last summer, we wrote about the Court of Appeal’s judgment in Nuffield Health v London Borough of Merton. You may recall that this case concerned rates relief and essentially whether a charity has to satisfy the public benefit test at all of its sites to obtain relief at those sites.

The starting point is that where premises are used wholly or mainly for charitable purposes by the occupying charity, that charity is entitled to a mandatory 80% relief from rates, with local authorities sometimes granting a further element of discretionary relief.

As a reminder, it was not in dispute in the Court of Appeal that Nuffield Health was a registered charity. Its purposes are clearly beneficial, being to: “advance, promote and maintain health and healthcare of all descriptions and to prevent, relieve and cure sickness and ill health of any kind, all for the public benefit”. The issue was that Merton council felt that the relevant Nuffield Health gym was not operated so as to provide sufficient public benefit (see a fuller discussion of the issues around public benefit in our previous article here).

Merton’s view was essentially that the subscription of around £80 per month made the facility exclusive, with no meaningful provision being made for those who could not afford the fee to benefit in other ways from the activities at the relevant premises. According to Merton, only the activities on this particular site needed to be taken into account for the purposes of determining whether mandatory rates relief applied, and not Nuffield Health’s wider nature or activities, whether or not those provided more public benefit.

Lord Justice David Richards in the Court of Appeal agreed that Nuffield Health’s use of the Merton premises would not deliver sufficient public benefit if viewed in isolation. The level of fees was, he felt, more than ‘the poor’ could reasonably be expected to afford. It was also very relevant that other gyms in the area provided equivalent services at significantly lower cost.

However, this did not ultimately mean that Merton Council won the day. While the Court of Appeal was not satisfied with the first instance judge’s reasoning on some points, it agreed (by majority, with Lord Justice David Richards dissenting) that he had been right in his finding that the analysis of whether mandatory rates relief is available should not be conducted on a site by site basis.

Under the Charities Act 2011, Nuffield Health, being registered with the Charity Commission, is “conclusively presumed”1 to be a charity. Accordingly, as Mr Stuart Isaacs QC had said in the High Court, “the requirements for it to be a charity are conclusively presumed to have been met, namely that it is established for purposes which are within [the relevant section of the] 2011 Act and that the purposes in question fulfil the public benefit requirement”.

Lord Justice Nugee put it nicely in the Court of Appeal, saying that Nuffield Health needed only to make the following statement: “I am a registered charity. My purposes, namely the advancement of health, are therefore (conclusively presumed to be) exclusively charitable [including that they are for the public benefit]. I am using Merton Abbey for those purposes. That is sufficient.”. So Merton Council walked away from court unhappy.

However, you may also remember from our previous article that Lord Justice Peter Jackson gave a very interesting P.S. in his judgment, as follows: “I would only add this. Nuffield Health may have succeeded under the rating legislation, but its failure, on our unanimous view, on Ground 3 [essentially meaning that the public benefit requirement would not have been satisfied in respect of the premises, if the court had had to rule on that] may not be without consequences in the context of charity law. Its trustees are obliged to satisfy themselves in good faith that its provision is for the public benefit. If the situation at the Premises is replicated across its several hundred fitness centres and gyms, the organisation may face scrutiny through the Charity Commission and ultimately through the courts, as occurred in the ISC case.”

In fact, Merton Council has now been granted leave to appeal to the Supreme Court. So we may see closer scrutiny of this issue quite soon. Watch this space for further commentary in due course.

[1] Charities Act 2011, s.37(1)